chevron CEO explains why energy is 'indispensable'

"We are a primary component in the supply chain for global economic expansion," Chevron Chairman and CEO John Watson told an audience in London of senior-level representatives and key decision makers from the oil and gas industry.

Speaking to 1,400 people at the Energy Institute's International Petroleum Week, Watson said: "Follow the supply chain of economic growth in any region and, above all, along that arc from India through China to South Korea. Without exception, it will lead you back to the energy sources that we draw from the ground.

"That's the picture in a world of 6 billion people. Consider a world of 9 billion by 2050—all of them wanting to live and prosper as we do, and no less deserving of that chance. Demand for traditional and new fuels will grow sharply. And serving that demand requires production, development and innovation on a scale equal to the challenge."

Watson added that the resources are there; over the past 30 years the world's proved reserves of oil and natural gas increased 130 percent, to 2.5 trillion barrels.

"The last several years alone have yielded deepwater and shale discoveries that couldn't have been imagined 10 years ago and, in any case, couldn't have been extracted. As vast as the world's energy needs are and will be, it is within our power to meet them.

"Energy is the indispensable industry," he added, referring to the title of his speech.

But this is a business where success and failure have very large consequences, Watson said. "A lot can be lost if we don't observe the highest of standards and keep our entrepreneurial edge." He outlined four strategies that will see us through:

Rebuild the conditions that maximize investment – "Even the best of energy companies can perform only as well as the legal and regulatory environment allows," Watson said. "What will it take to draw out investment capital on the massive scale that is needed? The answer is access to resources, rational regulatory and tax regimes, and a stable business climate."

Focus relentlessly on safe and reliable operations – "The Macondo incident was 10 months ago, but for us the lessons are not forgotten. We always manage toward incident-free operations. In our industry, when it comes to safety, the bottom line is zero."

Use technology to enhance ways that we produce energy, use energy and develop new sources of energy – "We've seen our industry make innovative leaps every year. We know that the smart application of technology can help recover more barrels per reservoir and lower the cost of producing those barrels." Watson suggested that the biggest technology challenge is how it can be applied to the economic development of renewables and other alternatives to fossil fuels at industrial scale. "Even under the most promising scenarios, it will take decades for alternatives to reach the affordability, reliability and scale of fossil fuels."

Build new partnerships that match the size of the challenges before us – "When it comes to reliable energy, economic growth, and environmental protection, everyone is a stakeholder and everyone is a beneficiary," Watson said. "Even the biggest companies in an indispensible industry know they'll do better work in collaboration."

International Petroleum Week brings together senior executives from about 40 countries and is the biggest forum of its type in Europe. Watson told the audience that the energy industry has a great opportunity and a great responsibility. No business enterprise is better positioned to meet the need for economic growth, "by investing, innovating and elevating our standards." He added, "Let it be the mission of our great industry to show the way."